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Offering an initial estimate of $25-$40 billion in insured losses from Hurricane Ian, Fitch Ratings said that P/C insurance and reinsurance company credit ratings are unlikely to be downgraded as a result of loss impacts.

Ample capital levels will help them absorb the hurricane losses, Fitch said in an statement yesterday.

Unrated carriers—Florida specialists that already suffered diminished capital and financial losses in recent years, prior to Ian—are still vulnerable to events producing losses in excess of reinsurance limits, however.

Fitch said that large national property/casualty insurers, in addition to having abundant capital, have already non-renewed Florida policies to manage balance sheet exposure and to manage reinsurance costs.

Noting that the exposure of market share leader, Citizens Property Insurance Corporation, continues to increase exposure as the entity assumes business from other Florida specialists and adds to policy counts, Fitch said Citizen does have the capacity to absorb losses from this event. But the continued growth will put a strain on Citizens and adds to the vulnerability of the Florida insurance market to the next catastrophic event.

According to Fitch, Citizens has stated that Ian will be a reinsurance loss event to the Florida Hurricane Catastrophe Fund but not a significant event for its private market reinsurers.

Private market reinsurers participating in a reinsurance program for the National Flood Insurance Program—a government-supported flood insurers run by the Federal Emergency Management Association—could be liable for up to $1.1 billion, however, Fitch said. According to the rating agency, 35 percent of NFIP’s policies are underwritten in Florida, by far the highest percentage of any state at just over 1.6 million policies.

Standard homeowners insurance does not typically cover flood damage, and the private market flood business in the U.S. remains less than 1 percent of industry direct premiums written, Fitch said, explaining the relatively small exposure for primary insurers in spite of the expected levels of flood and storm surges associates with Ian. A large amount of flooding triggering NFIP payouts, however, may also trigger the private market reinsurance coverage of the NFIP.

As for unrated primary insurance specialists participating in the Florida property market, Fitch noted that those insurers experienced severe downturns in underwriting performance and capitalization levels in recent years despite no hurricane hitting the state since 2018. Fitch expects Hurricane Ian to worsen the reinsurance capacity crisis for insurers, potentially causing the exit of more Florida specialist companies.

The Fitch briefing, published as Ian moved through Florida as a tropical storm before regaining hurricane strength on Thursday evening, said the rating agency’s first estimate of insured losses in the $25-$40 billion range relates to Florida only. The estimates could go up depending on the effect of the storm in the Carolinas, Fitch said.